FIRST DIVISION

[G.R. No. 152072. January 31, 2006.]

ROMEO G. ROXAS and SATIAGO . PASTOR, petitioners, vs.

ATOIO DE ZUZUARREGUI, JR., ERIQUE DE
ZUZUARREGUI, PACITA JAVIER, ELIZABETH R. GOZALES,
JOSEFIA R. DAZA, ELIAS REYES, ATIVIDAD REYES,
TERESITA REYES, JOSE REYES and ATOIO REYES,
respondents.

[G.R. No. 152104. January 31, 2006.]

ATOIO DE ZUZUARREGUI, JR., ERIQUE DE

ZUZUARREGUI, PACITA JAVIER, ELIZABETH R. GOZALES,
JOSEFIA R. DAZA, ELIAS REYES, ATIVIDAD REYES,
TERESITA REYES, JOSE REYES and ATOIO REYES,
petitioners, vs. THE ATIOAL HOUSIG AUTHORITY, JOSE B.
H. PEDROSA, ROMEO G. ROXAS and SATIAGO . PASTOR,
respondents.

DECISIO

CHICO-AZARIO, J : p

Before Us are two petitions for review on certiorari 1(1) which were
consolidated per Resolution 2(2) of this Court dated 27 November 2002. The
petitioners in G.R. No. 152072, Attys. Romeo G. Roxas and Santiago N. Pastor, seek
the reversal and annulment of the Decision 3(3) and Resolution 4(4) of the Court of
Appeals dated 25 June 2001 and 06 February 2002, respectively. The petitioners in
G.R. No. 152104, the Zuzuarreguis, on the other hand, pray that the said Decision and
Copyright 1994-2007 CD Technologies Asia, Inc. Jurisprudence 1986 to 2006 1
 Resolution of the Court of Appeals be modified. Said Decision and Resolution
reversed and set aside the decision of the Regional Trial Court (RTC), Branch 98,
Quezon City, dated 03 January 1994.

THE ATECEDETS

The instant cases had their beginnings in 1977 when the National Housing
Authority (NHA) filed expropriation proceedings against the Zuzuarreguis, petitioners
in G.R. No. 152104, for parcels of land belonging to the latter situated in Antipolo,
Rizal, with a total land area of 1,790,570.36 square meters, more or less. This case
was lodged before the RTC, Branch 141, Municipality of Makati, 5(5) docketed therein
as Civil Case No. 26804 entitled, "ational Housing Authority v. Pilar Ibañez Vda.
De Zuzuarregui, et al."

On 25 May 1983, said case was ordered archived 6(6) by Branch 141.

About a month before the aforecited case was ordered archived, the
Zuzuarreguis engaged the legal services of Attys. Romeo G. Roxas and Santiago N.
Pastor, to represent them in Civil Case No. 26804. This was sealed by a
Letter-Agreement dated 22 April 1983, which is partly reproduced hereunder:

April 22, 1983

Mr. Antonio de Zuzuarregui, Jr.
Mrs. Pacita Javier (as heir to the
late Jose de Zuzuarregui)
Mr. Antonio de Zuzuarregui ( as heir to
the late Pilar Y. vda. De Zuzuarregui)
Dear Sir and Madam:

This is to confirm in writing our verbal negotiations for us to represent

you in the expropriation proceedings filed by the National Housing Authority
against your goodselves before the Court of First Instance of Rizal (now the
Regional Trial Court) and docketed as Civil Case No. 26804. Our representation
shall also include the areas taken over by the Ministry of Public Works and
Highways which now formed part of the Marcos Highway at Antipolo, Rizal.
DCATHS

The areas affected are the following:

xxx xxx xxx

We shall endeavor to secure the just compensation with the National

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 Housing Authority and other governmental agencies at a price of ELEVEN
PESOS (P11.00) or more per square meter. Any lower amount shall not entitle
us to any attorney's fees. At such price of P11.00 per square meter or more our
contingent fee[s] is THIRTY PERCENT (30%) of the just compensation.

The other terms and conditions of our proposal are:

xxx xxx xxx

5. You are willing to accept NHA 5-year bonds as part payment up to 75% of
the total compensation. In the event of your desire to discount the bonds, we
shall assist to have them discounted at 75% of its face value.

6. Our lawyer's fees shall be in the proportion of the cash/bonds ratio of the
just compensation. Likewise our fees are subject to 10% withholding tax.

xxx xxx xxx

Should the above proposal be acceptable to your goodselves, kindly

signify your formal acceptance as (sic) the space hereunder provided.

Very truly yours,

(Sgd.) (Sgd.)
SANTIAGO N. PASTOR ROMEO G. ROXAS
Lawyer Lawyer
CONFORME:
(Sgd.) (Sgd.)
ANTONIO DE ZUZUARREGUI, JR. PACITA JAVIER
In my behalf and as heir to As heir to the late
The late Pilar Y. vda. De Jose De Zuzuarregui 7(7)
Zuzuarregui
A Motion to Set Case for Hearing, 8(8) dated 14 February 1984, was filed by
Attys. Roxas and Pastor in Civil Case No. 26804, praying that the case be revived and
be set for hearing by the court at the earliest date available in its calendar.

The appropriate proceedings thereafter ensued. On 29 October 1984, a Partial

Decision was rendered by Branch 141 in Civil Case No. 26804 fixing the just
compensation to be paid to the Zuzuarreguis at P30.00 per square meter.

The NHA filed a Motion for Reconsideration 9(9) dated 23 November 1984
praying that the Partial Decision be reconsidered and set aside, and a new one
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 rendered lowering the amount of just compensation in accordance with applicable
laws. Pending resolution thereof, a Joint Special Power of Attorney was executed by
Antonio De Zuzuarregui, Jr., Enrique De Zuzuarregui and Pacita Javier, in favor of
Attys. Roxas and Pastor, viz:

JOINT SPECIAL POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

That We, ANTONIO DE ZUZUARREGUI, JR., ENRIQUE DE

ZUZUARREGUI and PACITA JAVIER, all of legal age, . . . , do hereby
appoint, name and constitute ATTYS. ROMEO G. ROXAS and SANTIAGO
PASTOR, to be our true and lawful attorneys to act in our names and on our
behalves to do and execute all or any of the following acts and deeds subject to
our approval:

xxx xxx xxx

(2) To represent us in the negotiations for a compromise with the National

Housing Authority for our properties subject of the above case;

(3) To negotiate for and in our behalves for the settlement of the just
compensation of our properties payable in cash or in bonds;

(4) To sign and prepare all papers relative to the preparation of a Compromise
Agreement or any papers and communications which shall eventually bear our
signatures; and

(5) That this Special Power of Attorney is enforce (sic) as long as ATTYS.
ROMEO G. ROXAS AND SANTIAGO PASTOR are our lawyers in Civil Case
No. 26804 before the Regional Trial Court, Makati, Branch CXLI.

HEREBY GIVING AND GRANTING unto our said attorneys full

power and authority whatsoever requisite or necessary or proper to be done in or
about the premises, as fully to all intents and purposes as we might or could
lawfully do if personally present, and hereby ratifying and confirming all that
our said attorneys shall do or cause to be done under and by virtue of these
presents. SaCIDT

IN WITNESS WHEREOF, We have hereunto set our hands this 26th

day of August, 1985, in Makati, M. M., Philippines.

(Sgd.)
ANTONIO DE ZUZUARREGUI, JR.
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 (Sgd.)
ENRIQUE DE ZUZUARREGUI

(Sgd.)
PACITA JAVIER 10(10)
On 22 November 1985, a Special Power of Attorney was executed by Beatriz
Zuzuarregui vda. De Reyes in favor of Attys. Romeo G. Roxas, Santiago Pastor and
Basilio H. Toquero, quoted as follows:

SPECIAL POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

That I, BEATRIZ ZUZUARREGUI VDA. DE REYES, Filipino, of legal

age, widow, and a resident of E. Rodriguez Ave., Quezon City, Philippines do
hereby appoint, name and constitute ATTYS. ROMEO G. ROXAS,
SANTIAGO PASTOR and BASILIO H. TOQUERO, to be my true and lawful
attorneys . . . :

1. To represent me in the negotiation for a Compromise with the National

Housing Authority for my properties subject to my approval in CIVIL CASE
No. 26804, entitled "ational Housing Authority vs. Pilar Ibañez de
Zuzuarregui, et al., before the Regional Trial Court, Makati, Branch CXLI;

2. To negotiate for and in my behalf for the settlement of the just

compensation of my properties payable in cash or in bond, subject to my
approval;

3. To sign and prepare all papers relative to the preparation of a Compromise

Agreement or any papers and communications which shall eventually bear my
signature;

4. To accept for and in my behalf payments for my properties after the

Compromise Agreement is duly approved by the Court, the actual receipts of
which payments shall be signed by me.

HEREBY GIVING AND GRANTING unto my said attorneys full power

and authority whatsoever requisite, necessary or proper . . . to be done under and
by virtue of these presents.

IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of

November 1985, in the City of Manila, Philippines.

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 (Sgd.)
BEATRIZ ZUZUARREGUI VDA. DE
REYES 11(11)
On 10 December 1985, a Letter-Agreement was executed by and between
Antonio Zuzuarregui, Jr., Pacita Javier and Enrique De Zuzuarregui, on the one hand,
and Attys. Romeo G. Roxas and Santiago Pastor, on the other. The said
Letter-Agreement reads:

December 10, 1985

Atty. Romeo G. Roxas

Atty. Santiago Pastor
Makati Executive Center
Salcedo Village, Makati

Dear Atty. Roxas & Atty. Pastor:

This will confirm an amendment to our agreement regarding your attorney's fees
as our lawyers and counsels for the Zuzuarregui's properties expropriated by
National Housing Authority covering ONE HUNDRED SEVENTY-NINE (179)
HECTARES, more or less, covered by TCT Nos. 138340, 85633 and 85634 and
filed as Civil Case No. 26804.

We hereby confirm and agree that we are willing to accept as final and complete
settlement for our 179 hectares expropriated by NHA a price of SEVENTEEN
PESOS (P17.00) per square meter, or for a total of THIRTY MILLION FOUR
HUNDRED THOUSAND PESOS (P30.4 Million), all payable in NHA Bonds.
DcITHE

We also agree and confirm that for and in consideration of your services as our
lawyers and counsels in the said expropriation case, we commit and bind
ourselves to pay to you, your heirs or assignees-in-interest, as your contingent
attorney's fees any and all amount in excess of the SEVENTEEN PESOS
(P17.00) per square meter payable in NHA bonds as mentioned above.

This Letter Agreement serves also as your authority to collect directly from
NHA the amount pertaining to you as your contingent attorney's fees.

This Letter Agreement hereby amends and supersedes our previous agreement
regarding your attorney's fees as our lawyers and counsels in the
above-mentioned expropriation case.

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 Very truly yours,

(Sgd.) (Sgd.)
ANTONIO DE ZUZUARREGUI, JR. PACITA JAVIER
In my behalf as heir to As heir to the late
the late Pilar I. vda. de Jose De Zuzuarregui
Zuzuarregui

(Sgd.)
ENRIQUE DE ZUZUARREGUI

CONFORME:

(Sgd.) (Sgd.)
ATTY. ROMEO G. ROXAS ATTY. SANTIAGO PASTOR 12(12)

Resolution No. 1174 13(13) dated 16 December 1985 was issued by the NHA
stating that the Zuzuarregui property would be acquired at a cost of P19.50 per square
meter; that the Zuzuarreguis would be paid in NHA Bonds, subject to the availability
of funds; and that the yield on the bonds to be paid to the Zuzuarreguis shall be based
on the Central Bank rate at the time of payment.

As a result of the aforesaid NHA Resolution, a Compromise Agreement was

executed between the Zuzuarreguis and the NHA in Civil Case No. 26804. The
Compromise Agreement, stipulated among other things, that the just compensation of
the Zuzuarregui properties would be at P19.50 per square meter payable in NHA
Bonds. In a Decision dated 20 December 1985, the RTC, Branch 141, Makati,
approved the Compromise Agreement submitted by the parties.

On 27 December 1985, the NHA Legal Department, through Atty. Jose B. H.

Pedrosa, released to Atty. Romeo G. Roxas, in behalf of the Zuzuarreguis, the amount
of P20,000,000.00 in NHA Bearer Bonds as "partial payment for several parcels of
land with a total area of 1,790,570.36 square meters located in Antipolo, Rizal." 14(14)
On even date, Atty. Romeo G. Roxas delivered NHA Bonds to Antonio De
Zuzuarregui in the amount of P15,000,000.00. 15(15) On 04 February 1986, the
amount of P34,500,000.00 in Bearer Bonds was again released by the NHA to Atty.
Romeo G. Roxas in behalf of the Zuzuarreguis. 16(16) On 14 February 1986, the
Zuzuarreguis issued a receipt 17(17) for receiving the amount of P30,070,000.00. This
receipt included the P15,000,000.00 given to them last 27 December 1985. Again on
17 February 1986, the Zuzuarreguis, through Beatriz Zuzuarregui vda. De Reyes,
issued another receipt for the amount of P450,000.00 in NHA bonds. 18(18) The total
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 amount in NHA bonds released to Atty. Romeo G. Roxas in behalf of the
Zuzuarreguis amounted to P54,500,000.00. Out of this amount, the records show that
the amount turned over to the Zuzuarreguis by Atty. Roxas amounted to
P30,520,000.00 in NHA bonds.

Computed at P19.50 per square meter, the 1,790,570.36 square meters property
of the Zuzuarreguis was expropriated at a total price of P34,916,122.00. The total
amount released by the NHA was P54,500,000.00. The difference of P19,583,878.00
is, undoubtedly, the yield on the bonds.

On 25 August 1987, a letter 19(19) was sent by the Zuzuarreguis' new counsel,
Jose F. Gonzalez, to Attys. Roxas and Pastor, demanding that the latter deliver to the
Zuzuarreguis the yield corresponding to bonds paid by the NHA within a period of 10
days from receipt, under pain of administrative, civil and/or criminal action.

Attys. Roxas and Pastor answered via a letter dated 21 September 1987
explaining their side of the story. They stated therein, among other things, that the
amount that they got seems huge from the surface, but it just actually passed their
hands, as it did not really go to them. 20(20)

On 29 September 1987, a letter 21(21) was sent by the Zuzuarreguis through

Antonio De Zuzuarregui, Jr., to Attys. Romeo G. Roxas and Santiago N. Pastor,
informing the latter that their services as counsels of the Zuzuarreguis (except Betty)
in the expropriation proceedings filed by the NHA, docketed as Civil Case No. 26804,
was being formally terminated.

Apparently unsatisfied with the explanation of Attys. Roxas and Pastor, the
Zuzuarreguis filed a civil action for Sum of Money and Damages on 14 November
1989 before the RTC, Quezon City, Branch 98, docketed as Civil Case No.
Q-89-4013, against the NHA, Jose B. H. Pedrosa, Atty. Romeo G. Roxas and Atty.
Santiago N. Pastor. The Zuzuarreguis demanded that the yield on the NHA bonds be
turned over to them.

After due hearing, a Decision 22(22) in Civil Case No. Q-89-4013 was rendered
on 03 January 1994, dismissing the Complaint. The dispositive portion reads:

WHEREFORE, in view of the foregoing consideration[s], judgment is

hereby rendered ordering the dismissal of the complaint against all the
defendants; and, further ordering plaintiffs, jointly and solidarily, to:

1. Pay each of the defendants Romeo G. Roxas, Santiago Pastor and

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 Jose B. H. Perdosa, the amount of P200,000.00, P200,000.00 and
P100,000.00, respectively, as moral damages;

2. Pay each of the defendants Roxas, Pastor and Pedrosa, the amount
of P50,000.00, P50,000.00, and P25,000.00, respectively as exemplary
damages;

3. Pay attorney's fees to defendants Roxas and Pastor in the amount of

P20,000.00; and

4. Pay the costs of this suit.

A Notice of Appeal 23(23) dated 10 February 1994 was filed by the

Zuzuarreguis. Subsequently, on 26 April 1995, the Zuzuarreguis filed their appeal
brief with the Court of Appeals. The case was docketed as CA-G.R. CV No. 45732.

A Decision 24(24) was eventually promulgated by the Fifteenth Division of the

Court of Appeals on 25 June 2001, reversing and setting aside the ruling of Branch
98, viz:

Therefore, We find that the amount of P4,476,426.275 is, in the opinion

of this Court, commensurate to the services rendered by defendants-appellees.
This amount has been arrived at by giving to defendants-appellees P2.50 per
square meter of the 1,790,570.51 square meter expropriated properties of herein
plaintiffs-appellants.

WHEREFORE, I VIEW OF THE FOREGOIG, the decision

dated January 3, 1994 of the Regional Trial Court, National Capital Judicial
Region, Branch 98, Quezon City in Civil Case No. 89-4013 entitled "Antonio
Zuzuarregui, Jr., et al. versus ational Housing Authority, et al." for "Sum of
Money and Damages," is hereby REVERSED and SET ASIDE.
Defendants-Appellees Roxas and Pastor are hereby ordered to return to
plaintiffs-appellants the amount of P12,596,696.425, the balance from the
P17,073,122.70, received as yield from NHA bonds after deducting the
reasonable attorney's fees in the amount of P4,476,426.275. 25(25)

Attys. Roxas and Pastor filed a Motion for Reconsideration 26(26) on 25 July
2001. The Zuzuarreguis also filed a Motion for Reconsideration 27(27) on 30 July 2001,
not having been satisfied with the award, while the NHA and Pedrosa filed their
Motions for Reconsideration 28(28) on 03 August 2001. ACcEHI

In a Resolution dated 06 February 2002, the Court of Appeals denied for lack
of merit all the Motions for Reconsideration.
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 On 05 March 2002, Attys. Roxas and Pastor filed a Petition for Review on
Certiorari 29(29) assailing the Decision of the Court of Appeals, docketed as G.R. No.
152072. Likewise, on 21 March 2002, the Zuzuarreguis filed their own Petition for
Review on Certiorari 30(30) assailing the same Decision, docketed as G.R. No. 152104.

ASSIGMET OF ERRORS

Attys. Roxas and Pastor, petitioners in G.R. No. 152072, assign as errors the
following:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED ON A

QUESTION OF LAW IN HOLDING THAT THE LETTER-AGREEMENT
DATED DECEMBER 10, 1985 CANNOT BE ALLOWED TO STAND AS
THE LAW BETWEEN THE PARTIES; and

II

THE HONORABLE COURT OF APPEALS GRAVELY ERRED ON A

QUESTION OF LAW IN HOLDING THAT DEFENDANTS-APPELLANTS,
HEREIN PETITIONERS, CONCEALED TO THE PLAINTIFFS-APPELLEES,
HEREIN RESPONDENTS, THE YIELD OF THE NHA BONDS 31(31)

The Zuzuarreguis, petitioners in G.R. No. 152101, on the other hand, assign as
errors the following:

THE COURT OF APPEALS ERRED IN AWARDING TO PETITIONERS

THE PRINCIPAL AMOUNT OF ONLY P12,596,696.425 AND NOT
P17,073,122.70 MAKING A DIFFERENCE OF P4,476,426.28

II

THE RESPONDENTS SHOULD BE HELD LIABLE FOR INTEREST FROM

THE DATE OF THE FILING OF THE COMPLAINT UNTIL FULLY PAID

III

THE RESPONDENTS SHOULD BE HELD LIABLE FOR MORAL AND

EXEMPLARY DAMAGES AND ATTORNEY'S FEES

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 IV

THE RESPONDENTS NHA AND JOSE B.H. PEDROSA ARE JOINTLY

AND SEVERALLY LIABLE WITH RESPONDENTS ROXAS AND PASTOR
32(32)

ISSUE FOR RESOLUTIO

Drawn from the above assignment of errors, it is patent that the principal issue
that must be addressed by this Court is:

WHETHER OR NOT THE LETTER-AGREEMENT DATED 10 DECEMBER

1985, EXECUTED BY THE ZUZUARREGUIS, AND ATTYS. ROXAS AND
PASTOR, FIXING THE EXACT AMOUNT THAT MUST GO TO THE
FORMER, SHOULD STAND AS LAW BETWEEN THE PARTIES.

THE COURT'S RULIG

Attys. Roxas and Pastor, petitioners in G.R. No. 152072, contend in the main
that the Zuzuarreguis are only entitled to the amount of P17.00 per square meter for
the 1,790,570.36 square meters expropriated by the government. This was, according
to them, embodied in the Letter-Agreement dated 10 December 1985, wherein the
Zuzuarreguis agreed to accept the price of P17.00 per square meter. Besides, Attys.
Roxas and Pastor contend that the price of P17.00 was even way above the P11.00
that the Zuzuarreguis were willing to accept for their properties under the Letter of
Engagement executed by the parties earlier on 22 April 1983. Computed at P17.00 per
square meter, they stress that the amount that should go to the Zuzuarreguis for their
1,790,570.36 square meters property should be P30,439,696.10, and that in fact the
Zuzuarreguis have received P30,520,000.00. The Letter-Agreement dated 10
December 1985 should thus stand as law between the parties. Since this
Letter-Agreement, which was "as plain and simple as can be such that there is no need
for any further construction," already fixed the amount that would go to the
Zuzuarreguis (P17.00 per square meter), then it should be so. ASHaDT

Attys. Roxas and Pastor further assert that the receipts issued by the
Zuzuarreguis dated 14 February 1986 and 17 February 1986 indicated that the
amounts received by the latter were in "full and final payment" for the subject
properties.

The NHA, for its part, insists that there was no conspiracy between Attys.
Roxas and Pastor on the one hand, and the NHA and Atty. Pedrosa on the other, on
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 the application of yields from NHA bonds. 33(33) The Zuzuarreguis, according to the
NHA, "miserably failed to substantiate and establish conspiracy" between them.

The Zuzuarreguis, for their part, though they were triumphant in the Court of
Appeals, insist that the amounts awarded them were not enough. According to them,
the P12,596,696.425 awarded by the Court of Appeals was not correct. They should
have been awarded the amount of P17,073,122.70. Quoting the Zuzuarreguis:

Respondents Roxas and Pastor retained for themselves the amount of

P3,980,000.00 which represented the agreed attorney's fees of Roxas and Pastor
at P2.50 per square meter. The amount of P20,000,000.00 representing the yield
of all the bearer bonds was, in the words of the Court of Appeals, "deliberately
hidden" by respondents Roxas and Pastor from petitioners. By mathematical
computation, the P20,000,000.00 yield should be proportionately divided at the
ratio of P17.00 (petitioners') and P2.50 (share of respondents Roxas and Pastor).
Following this ratio of division, of the P20,000,000.00 yield, P17,073,122.70
should pertain to petitioners and the balance of P2,926,877.30 to respondents
Roxas and Pastor. Add this amount to the total of P3,980,000.00 at the agreed
rate of P2.50 per square meter, the total attorney's fees of respondents Roxas and
Pastor should be P6,906,877.30, not bad, again in the words of the Court of
Appeals, for handling "a simple expropriation case which ended up in a
compromise agreement." It was, therefore, in error to still deduct the amount of
P4,476,426.28 from petitioners share in the yield in the amount of
P17,073,122.70 leaving then only P12,596,696.42.

What was done, however, is that the product of 1,790,570.36 sq m. (area

of the expropriated land of petitioners) and P2.50 which is 4,476,426.28 was
again deducted from the P17,073,122.70 which is the corresponding share of the
petitioners out of the total yield of P20,000,000.00. If this were a criminal case,
petitioners were being sentenced twice for the same offense. 34(34)

The Zuzuarreguis further insist that legal interest on the amount of

P17,073,122.70 be imposed from the date of the filing of the complaint, including
moral and exemplary damages, and attorney's fees.

We sustain the Court of Appeals, but with modification in the computation.

A contract is a meeting of the minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service. 35(35)
Contracts shall be obligatory, in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. 36(36)

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 Under Article 1318 of the Civil Code, there are three essential requisites which
must concur in order to give rise to a binding contract: (1) consent of the contracting
parties; (2) object certain which is the subject matter of the contract; and (3) cause of
the obligation which is established. 37(37)

All these requisites were present in the execution of the Letter-Agreement.

Consent is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract. 38(38) The Zuzuarreguis, in
entering into the Letter-Agreement, fully gave their consent thereto. In fact, it was
them (the Zuzuarreguis) who sent the said letter to Attys. Roxas and Pastor, for the
purpose of confirming all the matters which they had agreed upon previously. There is
absolutely no evidence to show that anybody was forced into entering into the
Letter-Agreement. Verily, its existence, due execution and contents were admitted by
the Zuzuarreguis themselves. 39(39)

The second requisite is the object certain. The objects in this case are twofold.
One is the money that will go to the Zuzuarreguis (P17.00 per square meter), and two,
the money that will go to Attys. Roxas and Pastor (any and all amount in excess of
P17.00 per square meter). There was certainty as to the amount that will go to the
Zuzuarreguis, and there was likewise certainty as to what amount will go to Attys.
Roxas and Pastor.

The cause is the legal service that was provided by Attys. Roxas and Pastor. In
general, cause is the why of the contract or the essential reason which moves the
contracting parties to enter into the contract. 40(40)

It is basic that a contract is the law between the parties. 41(41) Obligations
arising from contracts have the force of law between the contracting parties and
should be complied with in good faith. Unless the stipulations in a contract are
contrary to law, morals, good customs, public order or public policy, the same are
binding as between the parties. 42(42)

In Licudan v. Court of Appeals, 43(43) we did not allow the Contract for
Professional Services between the counsel and his client to stand as the law between
them as the stipulation for the lawyer's compensation was unconscionable and
unreasonable. We said:

Although the Contract for Professional Services dated August 30, 1979
was apparently voluntarily signed by the late Aurelio Licudan for himself and on
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 behalf of his daughter, petitioner Cristina Licudan-Campos and by the petitioner
Wilfredo Licudan who both manifested in open court that they gave their free
and willing consent to the said contract, we cannot allow the said contract to
stand as the law between the parties involved considering that the rule that in the
presence of a contract for professional services duly executed by the parties
thereto, the same becomes the law between the said parties is not absolute but
admits an exception — that the stipulations therein are not contrary to law, good
morals, good customs, public policy or public order. 44(44)

Under the contract in question, Attys. Roxas and Pastor are to receive
contingent fees 45(45) for their professional services. It is a deeply-rooted rule that
contingent fees are not per se prohibited by law. They are sanctioned by Canon 13 of
the Canons of Professional Ethics, viz:

13. Contingent Fees. —

A contract for contingent fee, where sanctioned by law, should be

reasonable under all the circumstances of the case including the risk and
uncertainty of the compensation, but should always be subject to the supervision
of a court, as to its reasonableness. SDTIaE

and Canon 20, Rule 20.01 of the Code of Professional Responsibility, 46(46) viz:

CANON 20 — A LAWYER SHALL CHARGE ONLY FAIR AND

REASONABLE FEES.

Rule 20.01. — A lawyer shall be guided by the following factors in determining

his fees:

(a) The time spent and the extent of the services rendered or required;

(b) The novelty and difficulty of the question involved;

(c) The importance of the subject matter;

(d) The skill demanded;

(e) The probability of losing other employment as a result of acceptance of

the proffered case;

(f) The customary charges for similar services and the schedule of fees of
the IBP chapter to which he belongs;

(g) The amount involved in the controversy and the benefits resulting to the
Copyright 1994-2007 CD Technologies Asia, Inc. Jurisprudence 1986 to 2006 14
 client from the service;

(h) The contingency or certainty of compensation;

(i) The character of the employment, whether occasional or established; and

(j) The professional standing of the lawyer.

However, in cases where contingent fees are sanctioned by law, the same
should be reasonable under all the circumstances of the case, and should always be
subject to the supervision of a court, as to its reasonableness, 47(47) such that under
Canon 20 of the Code of Professional Responsibility, a lawyer is tasked to charge only
fair and reasonable fees.

Indubitably entwined with the lawyer's duty to charge only reasonable fees is
the power of this Court to reduce the amount of attorney's fees if the same is excessive
and unconscionable. 48(48) Thus, Section 24, Rule 138 of the Rules of Court partly
states:

SEC. 24. Compensation of attorneys; agreement as to fees. — An attorney

shall be entitled to have and recover from his client no more than a reasonable
compensation for his services, with a view to the importance of the subject
matter of the controversy, the extent of the services rendered, and the
professional standing of the attorney. . . . . A written contract for services shall
control the amount to be paid therefore unless found by the court to be
unconscionable or unreasonable.

Attorney's fees are unconscionable if they affront one's sense of justice,

decency or reasonableness. 49(49) It becomes axiomatic therefore, that power to
determine the reasonableness or the, unconscionable character of attorney's fees
stipulated by the parties is a matter falling within the regulatory prerogative of the
courts. 50(50)

In the instant case, Attys. Roxas and Pastor received an amount which was
equal to forty-four percent (44%) of the just compensation paid (including the yield on
the bonds) by the NHA to the Zuzuarreguis, or an amount equivalent to
P23,980,000.00 of the P54,500,000.00. Considering that there was no full blown
hearing in the expropriation case, ending as it did in a Compromise Agreement, the
44% is, undeniably, unconscionable and excessive under the circumstances. Its
reduction is, therefore, in order. This is in accordance with our ruling in the earlier
case of Tanhueco v. De Dumo 51(51) , where we reduced the amount of attorney's fees
from sixty percent (60%) to fifteen percent (15%), for being excessive and
Copyright 1994-2007 CD Technologies Asia, Inc. Jurisprudence 1986 to 2006 15
 unreasonable.

It is imperative that the contingent fees received by Attys. Roxas and Pastor
must be equitably reduced. In the opinion of this Court, the yield that corresponds to
the percentage share of the Zuzuarreguis in the P19.50 per square meter just
compensation paid by the NHA must be returned by Attys. Roxas and Pastor. HICEca

The yield on the NHA bonds amounted to P19,583,878.00. This amount must
therefore be divided between the Zuzuarreguis, on the one hand, and Attys. Roxas and
Pastor, on the other. The division must be pro rata. The amount of P17.00 that should
go to the Zuzuarreguis represents 87.18% of the P19.50 per square meter just
compensation, The P2.50 per square meter that was to go to Attys. Roxas and Pastor,
on the other hand, represents 12.82%.

The Zuzuarreguis are entitled to the yield equal to 87.18% of the

P19,583,878.00, while Attys. Roxas and Pastor are entitled to 12.82% of said amount.
The amount corresponding to 87.17% of P19,583,878.00 is P17,073,224.84. This is
the yield that the Zuzuarreguis are entitled to. Attys. Roxas and Pastor, on the other
hand, are entitled to P2,510,653.16.

Attys. Roxas and Pastor, in the opinion of this Court, were not shortchanged
for their efforts for they would still be earning or actually earned attorney's fees in the
amount of P6,987,078.75 (P4,476,425.59 + P2,510,653.16).

The amount of P17,073,224.84 must therefore be returned by Attys. Roxas and

Pastor to the Zuzuarreguis. They can take this out from the yield in the amount of
P19,583,878.00 which they have appropriated for themselves.

On the issue of moral and exemplary damages, we cannot award the same for
there was no direct showing of bad faith on the part of Attys. Roxas and Pastor, for as
we said earlier, contingency fees are not per se prohibited by law. It is only necessary
that it be reduced when excessive and unconscionable, which we have already done.

We likewise cannot hold the NHA and Atty. Pedrosa jointly and severally
liable to the Zuzuarreguis for there is no evidence to show conspiracy between them.

WHEREFORE, in view of all the foregoing considerations, the Decision and

Resolution of the Court of Appeals dated 25 June 2001 and 06 February 2002,
respectively, are AFFIRMED but with the MODIFICATION that Attys. Romeo G.
Roxas and Santiago N. Pastor are hereby ordered to return to the Zuzuarreguis the

Copyright 1994-2007 CD Technologies Asia, Inc. Jurisprudence 1986 to 2006 16

 amount of P17,073,224.84. No costs.

SO ORDERED.

Copyright 1994-2007 CD Technologies Asia, Inc. Jurisprudence 1986 to 2006 17

 Endnotes

1 (Popup - Popup)
1. Rollo (G.R. No. 152072), pp. 10-55; Rollo (G.R. No. 152104), pp. 9-23.

2 (Popup - Popup)
2. Id. (G.R. No. 152104), p. 356.

3 (Popup - Popup)
3. Id. (G.R. No. 152072), pp. 57-80, penned by Associate Justice Remedios
Salazar-Fernando with then Associate Justice later Presiding Justice Romeo A.
Brawner and Associate Justice Rebecca De Guia-Salvador, concurring.

4 (Popup - Popup)
4. Id. (G.R. No. 152072), pp. 82-83.

5 (Popup - Popup)
5. Now City of Makati.

6 (Popup - Popup)
6. Folder of Exhibits, p. 79.

7 (Popup - Popup)
7. Id., pp. 89-90.

8 (Popup - Popup)
8. Id., pp. 57-58.

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 9 (Popup - Popup)
9. Id., pp. 59-64.

10 (Popup - Popup)
10. Id., pp. 91-92.

11 (Popup - Popup)
11. Id., pp. 54-55.

12 (Popup - Popup)
12. Id., p. 9.

13 (Popup - Popup)
13. Id., p. 10.

14 (Popup - Popup)
14. Id., p. 15.

15 (Popup - Popup)
15. Id., p. 45.

16 (Popup - Popup)
16. Id., p. 16.

17 (Popup - Popup)
17. Id., p. 49.

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 18 (Popup - Popup)
18. CA decision, p. 15.

19 (Popup - Popup)
19. Folder of Exhibits, pp. 20-21.

20 (Popup - Popup)
20. Id., p. 25.

21 (Popup - Popup)
21. Id., p. 46.

22 (Popup - Popup)
22. Rollo (G.R. No. 152072), pp. 84-113.

23 (Popup - Popup)
23. Records, pp. 404-405.

24 (Popup - Popup)
24. Rollo (G.R. No. 152072), pp. 57-80.

25 (Popup - Popup)
25. CA decision, pp. 23-24.

26 (Popup - Popup)
26. CA rollo, pp. 233-260.

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 27 (Popup - Popup)
27. Id., pp. 264-270.

28 (Popup - Popup)
28. Id., pp. 272-278.

29 (Popup - Popup)
29. Rollo (G.R. No. 152072), pp. 10-55.

30 (Popup - Popup)
30. Id. (G.R. No. 152104), pp. 9-23.

31 (Popup - Popup)
31. Id. (G.R. No. 152072), p. 25.

32 (Popup - Popup)
32. Id. (G.R. No. 152104), pp. 13-17.

33 (Popup - Popup)
33. Rollo (G.R. No. 152072), p. 257.

34 (Popup - Popup)
34. Petition for Certiorari (G.R. No. 152104), p. 6.

35 (Popup - Popup)
35. CIVIL CODE, Art. 1305.

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 36 (Popup - Popup)
36. CIVIL CODE, Art. 1356.

37 (Popup - Popup)
37. Paderes v. Court of Appeals, G.R. No. 147075, 15 July 2005, 463 SCRA 504, 521.

38 (Popup - Popup)
38. CIVIL CODE, Art. 1319.

39 (Popup - Popup)
39. Order of the RTC dated 16 March 1990; Main Records, p. 101.

40 (Popup - Popup)
40. Jurado, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND
CONTRACTS, p. 454, 9th Revised Edition, 1987, citing Manresa, 5th Ed., Bk. 2, pp.
445-446.

41 (Popup - Popup)
41. Almeda v. Court of Appeals, 326 Phil. 309, 316 (1996); Reta v. National Labor
Relations Commission, G.R. No. 112100, 27 May 1994, 232 SCRA 613, 616; City of
Manila v. Intermediate Appellate Court, G.R. No. 71159, 15 November 1989, 179
SCRA 428, 436; Bagadiong v. Vda. De Abundo, G.R. No. 75395, 19 September
1988, 165 SCRA 459, 463.

42 (Popup - Popup)
42. In Re: Ricardo P. Presbiterio, Sr. v. Court of Appeals, et al., G.R. No. 102432, 21
January 1993, 217 SCRA 372, 373.

43 (Popup - Popup)
43. G.R. No. 91958, 24 January 1991, 193 SCRA 293.
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 44 (Popup - Popup)
44. Licudan v. Court of Appeals, supra, pp. 300-301.

45 (Popup - Popup)
45. A contingent fee is a fee charged for a lawyer's services only if the lawsuit is
successful or is favorably settled out of court (BLACK'S LAW DICTIONARY, p.
315, 7th Edition [1999]).

46 (Popup - Popup)
46. Licudan v. Court of Appeals, supra note 43, p. 301.

47 (Popup - Popup)
47. CANONS OF PROFESSIONAL ETHICS, Section 13.

48 (Popup - Popup)
48. New Sampaguita Builders Construction, Inc. (NSBCI) v. Philippine National Bank,
G.R. No. 148753, 30 July 2004, 435 SCRA 565, 592; citing Bachrach Garage and
Taxicab Co., Inc. v. Golingco, 39 Phil. 912, 920-921 (1919); Bachrach v. Golingco,
39 Phil. 138, 143-144 (1918); Sangrador v. Spouses Valderrama, G.R. No. L-79552,
29 November 1988, 168 SCRA 215, 229.

49 (Popup - Popup)
49. BLACK'S LAW DICTIONARY, p. 1526, 7th Ed. (1999).

50 (Popup - Popup)
50. De Santos v. City of Manila, 150-A Phil. 798, 805 (1972); Kalalo v. Luz, 145 Phil.
152, 174 (1970); Cruz v. Court of Industrial Relations, 118 Phil. 820, 825 (1963).

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 51 (Popup - Popup)
51. Adm. Cases Nos. 1437 and 1683, 25 April 1989.

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